101 lecture 7

1. Next Exam Exam 3 October 24th Chapter 7, 8, 9

2. Microeconomics Lecture 7 Consumers, Producers, and the Efﬁciency of Markets

3. Key Terms welfare economics willingness to pay consumer or buyer surplus value (consumer surplus) cost producer or seller surplus value (producer surplus) efﬁciency

4. Economic Surplus Consumer - Buyer Producer - Seller

5. Value Versus Price

6. Sellers value less than price Buyers value more than price

7. Always TwoValues in a trade

8. Always TwoValues in a trade Difference between what I am willing to pay for and the price Difference between what I am willing to sell for and the price

12. 0 100

13. BuyerValue 60 0 100

14. BuyerValue 60 SellerValue 40 0 100

15. BuyerValue 60 SellerValue 40 0 100

16. BuyerValue 60 SellerValue 40 Value Range 0 100

17. BuyerValue 60 SellerValue 40 Value RangePrice 0 100

18. BuyerValue 60 SellerValue 40 Value Range Price 0 100

19. BuyerValue 60 SellerValue 40 Value Range Price 0 100

20. BuyerValue 60 SellerValue 40 Value RangePrice 0 100

21. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold 0 100

22. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100

23. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue

24. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue = 60 - 40 = 20

25. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue = 60 - 40 = 20

26. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue = 60 - 40 = 20 Buyer or Consumer surplus value above price and below Buyer value

27. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue = 60 - 40 = 20 Buyer or Consumer surplus value above price and below Buyer value

28. BuyerValue 60 SellerValue 40 Value RangePrice Price between 40 and 60 will get sold As long as price is in the value range the pizza will sell 0 100 PotentialValue = BuyerValue - SellerValue = 60 - 40 = 20 Buyer or Consumer surplus value above price and below Buyer value Seller or Producer surplus value below price and above Seller value

29. Invisible Hand

30. Invisible Hand Buyer with highest value will be matched to the Seller with the lowest value

31. SurplusValue is equal to the difference between value and price

32. Economic Surplus is equal to seller surplus plus buyer surplus

33. Buyers Riyadh Pizza Market

34. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 Riyadh Pizza Market

35. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 Riyadh Pizza Market

36. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 Riyadh Pizza Market

37. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 Riyadh Pizza Market

38. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 Riyadh Pizza Market

39. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 32 Riyadh Pizza Market

40. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 32 30 Riyadh Pizza Market

41. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 32 30 28 Riyadh Pizza Market

42. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 32 30 28 26 Riyadh Pizza Market

43. Buyers Ali Abdullah Ahmed Faisal Mohammed Mahmood Sultan Turki 0 5 10 15 20 25 30 35 40 40 38 36 34 32 30 28 26 Price 29 Riyadh Pizza Market

55. Customer Value Price Surplus Ali 40 29 11 Abdullah 38 29 9 Ahmed 36 29 7 Faisal 34 29 5 Mohammed 32 29 3 Mahmood 30 29 1 Sultan 28 29 Turki 26 29 Total 36

67. Customer Value Price Surplus Ali 40 35 5 Abdullah 38 35 3 Ahmed 36 35 1 Faisal 34 35 Mohammed 32 35 Mahmood 30 35 Sultan 28 35 Turki 26 35 Total 9

78. Sellers Riyadh Pizza Market

79. Sellers Dominos Pizza Hut Dr Gale 0 5 10 15 20 25 30 35 40 Riyadh Pizza Market

80. Sellers Dominos Pizza Hut Dr Gale 0 5 10 15 20 25 30 35 40 20 Riyadh Pizza Market

81. Sellers Dominos Pizza Hut Dr Gale 0 5 10 15 20 25 30 35 40 20 25 Riyadh Pizza Market

82. Sellers Dominos Pizza Hut Dr Gale 0 5 10 15 20 25 30 35 40 20 25 30 Riyadh Pizza Market

83. Sellers Dominos Pizza Hut Dr Gale 0 5 10 15 20 25 30 35 40 20 25 30 Price 29 Riyadh Pizza Market

90. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue

91. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand

92. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply

99. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus

101. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus

102. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area = H x W ÷ 2 = (100 - 50) x 5 ÷ 2 = 250 ÷ 2 = 125

103. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area = H x W ÷ 2 = (100 - 50) x 5 ÷ 2 = 250 ÷ 2 = 125 Producer Surplus Area = H x W ÷ 2 = (50 - 0) x 5 ÷ 2 = 250 ÷ 2 = 125

104. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area = H x W ÷ 2 = (100 - 50) x 5 ÷ 2 = 250 ÷ 2 = 125 Producer Surplus Area = H x W ÷ 2 = (50 - 0) x 5 ÷ 2 = 250 ÷ 2 = 125 Total Surplus Area = H x W ÷ 2 = (100 - 0) x 5 ÷ 2 = 500 ÷ 2 = 250

105. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue

106. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand

114. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus

115. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area = H x W ÷ 2 = (100 - 40) x 4 ÷ 2 = 240 ÷ 2 = 120

116. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity SurplusValue Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area = H x W ÷ 2 = (100 - 40) x 4 ÷ 2 = 240 ÷ 2 = 120 Producer Surplus Area = H x W ÷ 2 = (40 - 20) x 4 ÷ 2 = 80 ÷ 2 = 40

120. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price

121. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand

122. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply

129. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus

130. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus

131. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus

132. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Government Price Minimum

135. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Government Price Minimum Loss

136. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Government Price Minimum Loss Loss

141. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Government Price Minimum Consumer Loss Producer Gain Loss Loss

142. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 45 Change = Lose 80 Government Price Minimum Consumer Loss Producer Gain Loss Loss

143. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 45 Change = Lose 80 Producer Surplus Area Before = 125 After = 165 Change = Gain 40 Government Price Minimum Consumer Loss Producer Gain Loss Loss

144. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Minimum Price Demand Supply Consumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 45 Change = Lose 80 Producer Surplus Area Before = 125 After = 165 Change = Gain 40 Total Surplus Area Before = 250 After = 210 Deadweight Loss = 40 Government Price Minimum Consumer Loss Producer Gain Loss Loss

145. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Government Maximum Price

146. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Government Maximum Price

147. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Supply Government Maximum Price

154. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Government Maximum Price

155. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Government Maximum Price

156. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Government Maximum Price

157. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Government Price Maximum Government Maximum Price

161. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Government Price Maximum Loss Government Maximum Price

162. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Government Price Maximum Loss Loss Government Maximum Price

166. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Government Price Maximum Consumer Gain Producer Loss Loss Loss Government Maximum Price

167. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 140 Change = Gain 15 Government Price Maximum Consumer Gain Producer Loss Loss Loss Government Maximum Price

168. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 140 Change = Gain 15 Producer Surplus Area Before = 125 After = 20 Change = Loss 105 Government Price Maximum Consumer Gain Producer Loss Loss Loss Government Maximum Price

169. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand SupplyConsumer Surplus Producer Surplus Consumer Surplus Area Before = 125 After = 140 Change = Gain 15 Producer Surplus Area Before = 125 After = 20 Change = Loss 105 Total Surplus Area Before = 250 After = 160 Deadweight Loss = 90 Government Price Maximum Consumer Gain Producer Loss Loss Loss Government Maximum Price

170. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Supply1

171. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Consumer Surplus Supply1

172. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Producer Surplus Consumer Surplus Supply1

173. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Producer Surplus Consumer Surplus Supply2 Supply1

174. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Producer Surplus Consumer Surplus Supply2 Supply1

175. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Supply2 Supply1

176. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Consumer Surplus Supply2 Supply1

177. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Consumer Surplus Producer Surplus Supply2 Supply1

178. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Shift Demand Consumer Surplus Producer Surplus Total Surplus Before = 250 After = 90 Change = Loss 160 Supply2 Supply1

101 lecture 7

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101 lecture 7